We recently published a list of 12 Best Infrastructure Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Cheniere Energy Inc. (NYSE:LNG) stands against other best infrastructure stocks to buy according to hedge funds.
Doug Rachlin, Neuberger Berman senior portfolio manager, joined CNBC’s ‘Squawk on the Street’ on January 27 to discuss why he believes that the current opportunity set in infrastructure is the best he has seen in three decades. Managing this strategy since the summer of 1996, Rachlin pointed to several factors driving his optimism. One major aspect is the role of midstream infrastructure companies in supporting energy dominance in the US. The US leads globally in propane exports, accounting for 46% of worldwide supply.
Rachlin emphasized that these investments align with principles from investors like Charlie Munger. He advocates for concentrated investing based on strong conviction rather than spreading bets thinly across many stocks. Regarding recent developments that might impact pipeline companies involved in natural gas transmission, such as news related to deep sea activities, Rachlin noted that natural gas prices reaching $4 were due to cold winter weather rather than AI-driven data center buildouts. He highlighted growth prospects for LNG exports over the next decade, which could reach up to 35 billion cubic feet per year under favorable policies initiated during Trump’s administration.
This growth aligns well with Neuberger Berman’s focus on midstream infrastructure within their broader energy transition strategy. The firm emphasizes utilities, renewables, and Master Limited Partnerships alongside traditional energy assets like pipelines critical for transporting natural gas. This is a vital component in powering data centers across the country. As LNG exports are set to double over four years (from ~13 billion cubic feet today to potentially over 25 billion cubic feet by end-2028) and possibly reach even higher levels thereafter, the demand for robust midstream infrastructure will continue growing. This scenario underscores why Rachlin views current opportunities as compelling within his long-standing career managing this sector-focused investment strategy.
The infrastructure asset management (IAM) market is booming. It was worth $37.65 billion in 2022 and is predicted to grow by 8.9% each year until 2030. This is because companies are using these services to save money on infrastructure maintenance. Industries like manufacturing and oil and gas use IAM to optimize existing assets and ensure upkeep, especially since upgrading older designs is expensive. For example, much of the US’s energy infrastructure is 25+ years old, and Europe struggles with water waste due to leaky pipes. IAM helps maximize return on assets, improving quality and productivity.
Methodology
We first sifted through ETFs, online rankings, and internet lists to compile a list of the top infrastructure stocks to buy. We then selected the 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Close-up of a liquefied natural gas terminal expelling plumes of smoke.
Cheniere Energy Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 62
Cheniere Energy Inc. (NYSE:LNG) is an energy infrastructure company that focuses on LNG-related businesses in the US. It owns and operates the Sabine Pass LNG terminal in Louisiana and the Corpus Christi LNG terminal in Texas, along with connecting pipelines. It’s also involved in the marketing of LNG and natural gas.
On January 31, Morgan Stanley increased its price target for the company to $255, due to the anticipated Sabine Pass expansion following the lifting of the US LNG project permitting pause. This expansion refers to the company’s planned project to increase LNG production capacity at its Sabine Pass facility. Cheniere Energy Inc.’s (NYSE:LNG) core business revolves around its infrastructure for producing and exporting LNG. In FQ3 2024 alone, it generated $820 million in distributable cash flow and $900 million in net income.
Cheniere Energy Inc. (NYSE:LNG) is actively expanding. The Corpus Christi Stage 3 project is a prime example. This expansion, currently under construction, is expected to increase the company’s LNG production capacity. With the first train slated for completion in early 2025, this project will add volumes to its output, and translate to higher revenue streams. The company is projecting 47 to 48 million tons of LNG production, a jump from its current levels. This increased production capacity will boost its revenue and provide greater flexibility in the market.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Cheniere Energy, Inc. (NYSE:LNG) in its Q3 2024 investor letter:
“We often see the ebb and flow of the Energy sector tied to underlying commodity prices. In this area, we seek low-cost exploration & production companies with high-yielding acreage or specialized service providers. Cheniere Energy, Inc. (NYSE:LNG) operates liquefied natural gas terminals in New Orleans and Corpus Christi. Second quarter results were largely as expected and forward guidance was increased. Management’s comments featured the timely completion of maintenance at both facilities as well as optimization efficiencies. That boosted the stock by 3%.”
Overall, LNG ranks 2nd on our list of best infrastructure stocks to buy according to hedge funds. While we acknowledge the growth potential of LNG, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.